Keilen Dimone Wiley of Houston, Texas, a registered representative with Farmers Financial, LLC, was found by the Securities and Exchange Commission to have converted insurance premium payments and provided false and misleading information to a self-regulatory organization (Financial Industry Regulatory Authority) during an on-the-record interview. In the Matter of the Application of Keilen Dimone Wiley, SEC Release No. 76558 (Dec. 4, 2015).
According to the Securities and Exchange Commission Opinion, from April 2002 – July 2011, while Wiley was associated with Farmers Financial, LLC, he had also been appointed as an independent insurance agent in the State of Texas with Farmers Insurance. Wiley reportedly agreed to sell insurance to Companies and submit to Companies every request or application for insurance for classes and lines underwritten by Companies and eligible in accordance with their published rules and manuals. Wiley also reportedly agreed to collect and promptly remit monies that were paid by policyholders and due to Wiley’s firm, and additionally conform to good business practices and applicable state and federal laws.
The Opinion indicated that Wiley had sold Farmers Insurance products under a “doing business as” designation of Wiley Insurance Agency and Associates (“WIA”), where Wiley had two bank accounts in the name of WIA. One of the accounts was reportedly used for business and personal expenses while the other was a merchant bank account for insurance premiums that customers would pay using their credit cards.
According to the Opinion, from March 2011 – May 2011, Wiley had collected $7,703.06 in Farmers Insurance premium payments from fifty-four customers. His firm had established “co-banking” accounts at several banks nationwide for agents to deposit collected insurance premiums. The Opinion stated that Wiley had reported the receipt of such payments with his firm’s system, but rather than promptly deposit the funds, Wiley had deposited $6,532.70 into Wiley Insurance Agency and Associates business bank account. Subsequently, Wiley reportedly used the funds for personal and business expenses.
The Opinion indicated that Wiley’s firm ultimately conducted an audit and Wiley’s manager had informed Wiley that there were missing deposits from Wiley’s co-banking account. Wiley’s senior auditor testified that during the interview with Wiley, Wiley had stated that he deposited the customer payments into his WIA business account because he needed to use the money “for a little while.” The Opinion stated that Wiley admitted that he used the funds he received from customers to pay for his own personal and outside business expenses.
Farmers Financial terminated Wiley on June 7, 2011, subsequent to a voluntarily statement that Wiley provided accompanying his admissions, where he explained that he had financial problems from a bitter divorce, foreclosure on his home, staffing problems, his poor credit, and negative balances in his business accounts. Wiley reportedly indicated that he knew that he would be walking a fine line concerning his conduct of using customer payments and repaying his firm later, but that it was a risk that he was willing to take.
FINRA had investigated Wiley’s conduct giving rise to his termination, where pursuant to Rule 8210, FINRA requested that Wiley provide on the record testimony. The Opinion indicated that during Wiley’s testimony with FINRA, he had confirmed that he misunderstood Rule 8210’s requirement that he answer questions truthfully, fully, and accurately. For example, Wiley reportedly answered “no” to the question of whether he had used customer funds for his personal use.
FINRA’s Department of Enforcement ultimately filed a complaint against Wiley in 2013, alleging that he intentionally converted customer insurance premium payments for his own use and in violation of FINRA Rule 2010 and provided false and misleading testimony to FINRA during his interview. On April 29, 2014, FINRA’s Hearing Panel found that Wiley had converted insurance premium payments from fifty-four customers in violation of FINRA rules. On appeal, FINRA’s National Adjudicatory Counsel affirmed the Hearing Panel’s findings and sanctions – including a permanent bar from associating with any FINRA member in any capacity for his conversion. The Securities and Exchange Commission, in reviewing Wiley’s appeal to FINRA’s National Adjudicatory Counsel, affirmed the judgment – finding that Wiley’s use of customer premium payments to pay his personal and business expenses was conversion.
Firms and individuals, not surprisingly, are prohibited from unauthorized use of customer funds, borrowing of a customer’s securities or funds, forgery, non-disclosures or misstatements of material facts, and various deceptions and manipulations. Such conduct can also be found to violate criminal and other civil laws, and be subject to sanction from the federal and state government bodies.
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